How do you match different CSV lending products to the client?

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Permanent life insurance can double as a vehicle that makes borrowing money simple, fast and easy. Policyholders can leverage the cash surrender value (CSV) to secure a convenient line of credit for any number of purposes. With a range of CSV lending solutions, how do you match the correct one to your client?

Before you focus on the product, think about the client.

Sometimes clients have a specific need in mind, like an opportunity to invest or to make a significant purchase. Beyond asking the client what’s important to them in terms of interest rate or the ability to borrow again, widen the scope. Include questions that will offer a more holistic review. The more you know about a client’s finances and goals, the better you can make an appropriate recommendation.

There are many ways to incorporate borrowing into your client’s broader financial plan.

Even if there’s no immediate need, you can be proactive and make the CSV lending conversation part of your annual reviews.

Life milestones and other major events – such as the birth of a child, home purchases or renovations, business changes, and retirements – can also trigger borrowing discussions.

For example, consider a client who talks about wanting to retire with a certain income. As part of their financial plan, ensure that you investigate all the borrowing options available to them. Maximize the positive impact that a well-considered borrowing strategy can have on a client’s financial picture.

And if you hear the words “I can’t afford” or “I need to make a withdrawal,” that’s another cue to think about CSV lending. Clients are less emotionally attached to their insurance contract than to, say, the idea of refinancing their home or selling an asset. It also might not be the right time to withdraw from the investments they hold with you. CSV lending might be a more viable solution.

Review the options

So those are some situations that can prompt a CSV lending conversation. As for which products work best, reflect on how your client situations mesh with various options.

Access Lines of Credit (ALOC) can be a simple way to obtain credit by leveraging the cash value held in a permanent life insurance contract (or Manulife mutual funds, segregated fund contracts or GICs).

An ALOC can help secure financing solutions starting at just $25,000 (CAD) with no set maximum. This allows clients to consider our lines of credit for anything ranging from home repairs, medical emergencies and short-term job loss, to consolidating debt and funding business goals. As well, clients can leverage their permanent contracts from 10 of Canada’s largest life insurers.

If the ALOC is used for investment purposes, the client may also be able to write off interest^*.

Another useful strategy is the Insured Retirement Program (IRP), which can help retirees supplement retirement income. Rather than withdrawing the cash value from their life insurance to do so, they can leverage the built-up CSV to secure a line of credit.

Then there’s an Immediate Financing Arrangement (IFA). Here, clients can afford to pay sizeable premiums for significant death benefits but want to strategically manage their cash flow and tax planning^*.

Once the contract is in force, they can borrow against the CSV in the contract to minimize (or even neutralize) the cash flow impact of the premiums. Clients can use that cash for any purpose and pay interest only on the premium each month. The IFA is separate from the insurance contract itself.

Who uses these products?

It helps to understand the typical client profiles. For each product, they include:

• ALOC – young to middle-aged professionals with financial plans generally on track who want to establish an emergency fund.
• ALOC Plus – established professionals or small business owners.
• IRP – retired or nearing retirement (minimum age 50) individuals who want to leave a legacy to beneficiaries.
• IFA – successful business owners, medical/dental professionals and high-income/high-net-worth clients.

All these facilities have relatively low interest rates and let clients take advantage of a typically passive asset – the CSV in their insurance contract.

When is the best time to put CSV lending strategies in place? When your client doesn’t require them yet. By educating clients about these lending strategies and having the credit facility in place ahead of time, you can help them to be agile when the time comes to access capital.

Learn more about the benefits of Manulife Bank’s insurance lending solutions.

^* Clients should consult their own tax advisors with respect to their specific situation.